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ATVI: After Dismal Q1, Wedbush Sees ‘Significant Outperformance’

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Apr. 2 2019, Published 8:02 a.m. ET

Activision Blizzard

Activision Blizzard (ATVI) had a dismal first quarter with a negative price action of 1.5%. However, the stock started the second quarter on a strong note and rose 3.5%. Looking at other gaming stocks, Take-Two Interactive Software (TTWO) and Electronic Arts (EA) rose 1.4% and 1.0%, respectively, on April 1.

According to CNBC, Activision Blizzard’s price action was supported by a bullish note from Wedbush. The brokerage added Activision Blizzard to its “best idea” list. The brokerage thinks that Activision Blizzard could deliver a “significant outperformance” in 2019. Most brokerages have been bearish on the stock. Wedbush lowered Activision Blizzard’s target price in February. On March 28, Bernstein lowered Activision Blizzard’s target price.

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Analysts’ ratings

After Activision Blizzard’s fourth-quarter earnings, Suntrust Robinson lowered its target price from $54 to $49. Cowen and Bernstein also lowered the stock’s target price following its earnings release. While Activision Blizzard’s earnings were largely in line with the estimates, it missed the revenue estimates. Activision Blizzard lowered its 2019 outlook.

Activision Blizzard said, “Our 2019 outlook assumes that we will not improve in-game monetization as quickly as we would like. And that it is a transition year where we have less new major content to release than we should.”

Activision also announced layoffs and a new $1.5-billion share repurchase program. Several analysts supported the restructuring initiatives that Activision Blizzard announced during its fourth-quarter earnings call. Activision Blizzard has received a “buy” or higher rating from 22 analysts. The other 11 analysts polled by Thomson Reuters on April 1 rated the stock as a “hold” or some equivalent.

Last week, Apple (AAPL) announced its gaming subscription service.

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